Two-tier rates for delinquent taxpayers eyed

MANILA, Philippines — The Department of Finance (DOF) said it is eyeing a two-tier tax rate for delinquent taxpayers under the proposed tax amnesty program.

In a speech before the Rotary Club of Manila, Finance Secretary Carlos Dominguez said the government is pushing for a general amnesty program on all unpaid internal revenue taxes, excluding internal revenue taxes arising from importation and customs duties.

Under the proposal, delinquent taxpayers who wish to avail of the amnesty program would pay only 50 percent of the basic tax, excluding surcharges and the interest charged.

However, for those already facing criminal cases in court, the rate is proposed at 80 percent, also of the basic tax only.

Dominguez said the government is also planning to roll out a separate amnesty program for those with unpaid estate taxes.

 “The program will help clear the dockets, as well as enable the transfer of stranded real properties so that they can be made economically useful,” he said.

In particular, the finance chief said the proposal is to lower the rate to only six percent of the net undeclared estate for those who died prior to Jan. 1, 2018. Previously, the estate tax rate was at 20 percent.

The proposal to implement a tax amnesty program is part of Package 1B of the government’s Comprehensive Tax Reform Program. A bill containing the proposal is currently pending in Congress. Dominguez said earlier the bill is expected to be passed by Congress in the third quarter.

In line with this, Dominguez said the implementation of the amnesty program would be moved to April 2019, in time with the income tax filing season of the Bureau of Internal Revenue (BIR).

Aside from tax amnesty, Package 1B involves adjustments in the motor vehicle users charge and amendments in the Bank Secrecy Law. These provisions were originally proposed under Republic Act 10963 or the TRAIN Law, but the final version of the law did not include these measures.

According to DOF estimates, the government is expected to generate P38.9 billion in additional revenue.

Meanwhile, Dominguez said the DOF is also proposing that the value-added tax (VAT) “be treated as purely a consumption tax.”

 “As such, it will be collected at the point of consumption or sale, and it will be refunded when the consumption is done outside the Philippines. VAT exemptions should not be granted as investment incentives,” he said.